The Dynamics Of Herding In Indian Equity Markets: Evidence From It Stocks
Raghavendra S. Chauhan
Assistant Professor, Guru Gobind Singh Indraprastha University, Delhi, India
Abstract
The present study examines the existence of herding amongst the investors and market participants in Indian equity market. The study distinct itself from previous other studies as it looks for herding patterns specifically in a sectorial index (IT)in contrast to the multi-sectorial benchmark index in an emerging economy. For determining the existence of herding the methodology of Chang et al. (2000) based on cross sectional absolute deviation (CSAD) has been employed. The analysis is based on the daily closing values of CNX Nifty IT index and its constituents’ scripts for a period of 6 years ranging from April 1, 2009 to October 31, 2015. The results of our study show no conclusive evidence of herding in the IT sector stocks in Indian stock market. A deeper analysis aimed at measuring herding patterns in bullish and bearish phases too indicates an absence of herding in Indian stock market. The results of our study have meaningful implications for the policy makers for regulation of the markets and for investors in chalking out their investment strategies. The study presents an integrated approach of investors towards asset pricing and indicates that investors do not indulge in "imitation buying" and make decisions based on their information